French business activity shrank in March at the fastest pace in four years, and business confidence showed no improvement

Surveys of companies indicated the eurozone’s second-biggest economy is probably plunging into recession again for the third time since the financial crisis.

The services sector, which generates 56 percent of French economic activity, is suffering worst with the PMI (Purchasing Managers Index) compiled from those surveys dropping to its lowest since February 2009, when France and much of the developed world was mired deep in a recession triggered by the financial crisis.

Markit, which carried out those surveys, said the figures suggested the economy could contract by as much as 0.7 percent this quarter.

Markit chief economist Chris Williamson said: “At the moment I can just see contraction, and potentially an increased rate of contraction as the year goes on unless more is done to stimulate growth and boost business and consumer confidence. Otherwise companies and households will move increasingly into cost-cutting measures.”

Tobias Blattner, Director of European Economic Research at Daiwa Capital Markets gave his interpretation: “A recession is very much the most likely outcome we are expecting now for the French economy. But I think when we look at the breakdown of the PMIs we can also see that this time it’s more actually the services sector, and that mostly suggests that it’s very weak domestic demand and that was usually the cornerstone of French growth in the past couple of years.”

With consumer spending faltering, construction contracting and business investment slumping, France will have to depend on exports for any growth.

The latest forecast from the national statistics office INSEE is more optimistic than Markit’s. The statisticians believes that there will have been zero economic expansion in the first three months of this year and GDP will grow by just 0.1 percent in the second quarter.

There was a grim prediction on jobs from INSEE. It sees French unemployment hitting its highest level in over 15 years – at 11 percent of the workforce – between April and June.